"Rogue trader" Kweku Adoboli costs Swiss bank UBS $2 billion

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Rogue trader Kweku Adoboli costs Swiss bank UBS $2 billion

AFP
September 16, 2011 12:00AM

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Oswald Gruebel, CEO of Swiss Bank UBS. The bank revealed today that unauthorised trading had taken place in its investment banking division. Picture: AP

POLICE in London have arrested a suspected rogue trader alleged to have lost Swiss banking giant UBS $1.95 billion.

The 31-year-old UBS trader, Kweku Adoboli, was arrested over the alleged fraud early yesterday, police said.

UBS declined to confirm his name and provided little specific information, saying the information was still under investigation and no client money was involved.

Two minutes before trading began on the Swiss stock exchange, the bank issued a statement that it "has discovered a loss due to unauthorised trading by a trader in its Investment Bank".

Switzerland's largest bank warned it could report a loss for the entire third quarter as a result of the rogue trade, while shares in UBS AG plummeted 8.7 per cent to $11.41 on the Zurich exchange by early afternoon.

The announcement is a severe blow to the bank's retrieved reputation after the financial crisis which tarnished the standing of Swiss banking, as well as to its profit outlook and puts a question mark over the investment banking division.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion," the bank said.

The case immediately evoked memories of Jerome Kerviel, the trader at French bank Societe Generale who secretly gambled away $6.6 billion.

The scale of that fraud rocked the global financial industry and prompted banks to tighten oversight rules to ensure such large sums couldn't be traded unnoticed.

The Swiss banking regulator Finma said it was in contact with UBS about the incident, which was discovered late Wednesday.

"From the scale of this case you can be sure that it's the biggest we've ever seen for a Swiss bank," Finma spokesman Tobias Lux told The Associated Press.

Read more: http://www.news.com.au/business/man-arrested-in-london-over-ubs-trading/story-e6frfm1i-1226138212263#ixzz1Y43apzRy

[Brocke]

Moody's eyes UBS downgrade

    AFP
    September 16, 2011 8:41AM

RATINGS firm Moody's says it is considering lowering the credit rating on Swiss banking giant UBS after a rogue trader wracked up $US2 billion ($1.95 billion) in losses.

Moody's said its review will focus on "ongoing weaknesses in the (UBS) group's risk management and controls that have become evident again by the events leading to UBS announcing a loss due to unauthorised trading by a trader in its Investment Bank".

The ratings agency's move came after UBS said on Thursday it had lost $US2 billion ($A1.95 billion) through unauthorised trading, after London police arrested a man suspected of committing the massive fraud.

"Moody's believes that a loss of that magnitude would be manageable for the Group given its sound liquidity and capital position," the company said in a statement.

"However the losses call into question the Group's ability to successfully complete the rebuilding of its Investment banking operations."

Moody's said it had put the bank's financial strength rating and Aa3 long-term debt and deposit ratings "on review for possible downgrade."

The rating agency noted that UBS had made progress in improving its troubled risk management function.

"However, we have continued to express concerns with regards to the ability of management to develop a robust risk culture and effective control framework while at the same time trying to re-establish its position in certain market segments.

"The events of today suggest that this remains a key downside risk for the Group."

Read more: http://www.news.com.au/breaking-news/moodys-eyes-ubs-downgrade/story-e6frfku0-1226138601135#ixzz1Y47DHUOM

[Brocke]

Suspected rogue trader weeps in dock as he faces £1.3bn fraud charge

16 Sep 2011

Suspected rogue trader Kweku Adoboli wept in the dock today as he appeared in court accused of a £1.3 billion fraud at Swiss banking giant UBS.

With an open-necked white shirt and sky blue sweatshirt, Kweku Adoboli stood accused of fraud and two charges of false accounting, one of which dated back to 2008.

The 31-year-old was remanded in custody to appear again at City of London Magistrates Court for a committal hearing on September 22.

During the fifteen minute hearing, the well-built Ghanaian was handed a tissue from the clerk as he wiped a tear away.

The alleged rogue trader, son of a former Ghanaian official for the United Nations, joined the Swiss firm in a junior capacity in 2002.

He was arrested at his desk in a swoop by police in the early hours yesterday. The alleged fraud offence took place between January 1 and September 14 this year, the court heard.

The fraud charge against him read: "While occupying a position, namely being a senior trader with Global Synthetic Equities, in which you were expected to safeguard, or not to act against, the financial interests of UBS Bank, you dishonestly abused that position intending thereby to make a gain for yourself, causing losses to UBS or to expose UBS to risk of loss."

Adoboli's lawyer Louise Hodges, of solicitors Kingsley Napley, made no application for bail for her client, from Clark Street, Bethnal Green, east London.

After hearing from Crown Prosecution Service prosecutor David Levy, Chief Magistrate Carolyn Wagstaff told Adoboli: "You are remanded to appear back at this court on September 22 at 10am."

A packed courtroom looked on as the defendant stared down at his feet while he was ushered back to his custody cell.

Adoboli worked as a director of exchange traded funds (ETF) and delta-1 trading at UBS Investment Bank.

ETFs are an investment fund traded on stock exchanges, much like stocks, which hold assets such as stocks, commodities or bonds.

UBS, which has 6,000 staff in the UK, saw its shares slide 10% yesterday after it revealed the loss of £1.3 billion.

The loss could tip the bank into the red for the third quarter. The stock was three per cent higher today.

The disclosure heightened calls for greater regulation in the banking industry. A Swiss newspaper today reported that UBS will cut jobs at its investment banking unit, with "massive" savings due to be announced on November 17.

The bank has already been hit by global growth fears and last month said it would reduce its overall headcount by 3,500 as part of a move to save two billion Swiss francs (£1.5 billion) by the end of 2013.

more: http://www.thisislondon.co.uk/standard/article-23987590-ubs-chief-exec-calls-pound-13bn-loss-distressing-as-trader-is-questioned-over-deals.do

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Crisis at UBS deepens as rating giants threaten cuts

Nick Goodway
16 Sep 2011

UBS, the bank hit by a $2 billion (£126.5 billion) rogue trader, suffered a further blow today as the three leading credit agencies said they were reviewing its current rating for a possible downgrade.

Standard & Poor's said it had put the bank's long-term rating on watch with "negative implications."

Fitch & Co said it had put the bank's viability rating on negative watch.

Moody's said that its review would "centre on ongoing weaknesses in UBS risk management and controls that have become evident".

Raised credit rating would make it more difficult for UBS to borrow money from rival banks and make potential lenders and bond investors demand higher interest rates from it.

It emerged today that arrested trader Kweku Adoboli blew the whistle on himself, informing bosses of his massive gambles on Wednesday morning.

UBS did not call in the police until 1am on Thursday. Adoboli was arrested at 3.30am yesterday...

More: http://www.thisislondon.co.uk/standard-business/article-23987633-ubs-to-scale-back-investment-bank-after-dollar-2bn-rogue-trader-loss.do

[Brocke]

UBS trader told bank of error, the BBC learns

16 September 2011 Last updated at 11:55 GMT

The UBS trader being questioned on suspicion of unauthorised trading which lost the bank $2bn (£1.3bn) alerted his employers himself, the BBC has learnt.

The BBC's business editor, Robert Peston, says UBS's internal controls did not pick up the huge loss allegedly generated by its trader Kweku Adoboli.

He says Mr Adoboli told UBS that he had engaged in unauthorised trades.

The Financial Services Authority, the City regulator, is investigating why UBS did not identify the transactions.

After being alerted, UBS then examined Mr Adoboli's trading positions and informed the Financial Services Authority and the police.

Our correspondent says: "The disclosure that it was Mr Adoboli's decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren't capable of controlling the huge risks that their traders take."

Kweku Adoboli, who was believed to work in the European equities division at UBS, was still being held for questioning on Friday, having been arrested by City of London police at 3:30 on Thursday morning.

'Out of control'

Chris Roebuck, visiting professor at the Cass Business School said: "Why did the systems not spot this before it got totally out of control? This is a key question the risk systems managers must answer - but he must have found a way round the systems to get this far into debt."

UBS would not comment on the matter.

Mr Adoboli has taken on the law firm Kingsley Napley, which also represented Nick Leeson, the rogue trader who brought down Barings Bank.

It has also emerged that UBS has come under pressure from the Swiss government to either close its investment banking operations or separate them from its retail bank.

"Even separation would have profound ramifications, in that a separated investment bank would be deemed by creditors and investors as much riskier than the current integrated, universal-banking form of UBS," Robert Peston says...

more: http://www.bbc.co.uk/news/business-14943084